Investing abroad

Perhaps discouraged by the local investment climate or maybe seeing good business opportunities abroad, Filipino companies have been investing abroad quite a bit in recent years. With almost no track record of foreign takeovers, Philippine conglomerates have made $6 billion in overseas acquisitions since 2014, a recent article of the Wall Street Journal reports.

“Philippine conglomerates, flush with cash and confidence, are seeking to transform themselves into regional players in fields from food and beverages to real estate by going on an acquisition spree,” the WSJ observed. And, the WSJ pointed out, our locals are doing all these “while falling demand in China and weak commodity prices have left many global companies reeling.”

Obviously profiting from our strong consumer-led economic growth, our top eight conglomerates in 2014 brought in revenues that broke $40 billion, more than twice what it had been four years earlier, WSJ noted. Most conglomerates are expected to report further increases for 2015.

Where else will the best earning conglomerates bring their cash after investing in more malls and condo developments? Well… to build more malls and condo developments abroad, principally in China for SM. Ayala has a partnership with a Malaysian developer and the Gokongwei Group has a long standing investment in a Singapore property company.

Other companies capitalize on what they do best by buying into companies abroad in their own line of business. Jollibee recently bought into an American hamburger chain in an attempt to break into the mainstream market.

Two years ago, JG Summit acquired Griffin Foods, a New Zealand maker of cookies and other snacks, for $608 million. They are hoping the acquisition would help its food and beverage unit, Universal Robina, become a regional business.

Also aggressively acquiring foreign companies is Andrew Tan’s Alliance Global. Its Emperador unit spent $1.1 billion in 2014 and 2015 buying a British spirits company and two Spanish liquor brands in addition to vineyards in Spain.

Del Monte Pacific of Butch Campos of the Unilab family acquired the US operations of Del Monte. PLDT bought a stake in Rocket Internet of Germany in a bid to participate in the fast moving tech world. The local telco is also investing in a number of start-ups through a tech incubation unit headed by Doy Vea.

Then there is Liwayway of the low profile entrepreneur Carlos Chan which markets the Oishi snacks brand. According to Forbes, Oishi’s market share is equivalent to annual retail sales of about $1 billion throughout the region in 2013, citing a Euromonitor report used by University of Asia and the Pacific (UAP) economist Rolando Dy.

“Liwayway’s overseas sales are estimated to be 90 percent of its total sales. Liwayway is operating in six countries, making it truly a multinational (corporation),” writes Dy.

The UAP agri business expert mentioned only three other Filipino companies with a significant international footprint: Del Monte Pacific, the canned-pineapple maker that recently bought Del Monte Foods in the US; Universal Robina, the Philippines’ largest snack-food group, which has plants in other Southeast Asian countries; and Filipino fast-food giant Jollibee Foods.

According to Forbes, bumper earnings have helped fund $6 billion in overseas acquisitions since 2014 by Philippine companies which had almost no track record of foreign takeovers. Local companies were previously criticized as too conservative and inward-focused.

“Before 2014, the only high-value foreign play by any Philippine company was San Miguel’s $610 million acquisition of Malaysian energy assets from Exxon Mobil in 2011,” Forbes reports.

Curiously, the Philippines itself has been finding it difficult to attract foreign investors compared to its regional peers. Yet, its leading conglomerates have been merrily investing profits earned locally, abroad.

While this may be a reflection of the poor investment climate here, it is also likely the local companies have already maximized their opportunities in the local market and must spread their wings abroad. SM can only build so many more malls here, and if they want to build more malls, will have to go abroad.

Jollibee, on the other hand, needs to follow its Philippine customers who are now part of the Pinoy diaspora. Thus, I noted Jollibee outlets in California located in areas with large concentrations of Filipinos. And successful as they have been with this ethnic segment, Jollibee bought into Smashburger to start penetrating the mainstream market.

I see this trend in a positive light. It spreads out business risk across a wide geographic area and enables local companies to do what they do best outside the home base. Since they employ a lot of Filipinos to run the foreign operations, our workforce get international experience and outlook.

I do not share the view the capital they send abroad is a lost resource that could have been used to help the home country develop. That could have been a resource just slept in bank vaults in the light of the high liquidity we have been having over the past years.

In the process of operating units abroad, the companies also acquire world class competitive capability that would help them scale up their operations further. Then of course, flying the Philippine flag abroad also helps boost national morale at a time when it needs it most.

It is about time we as a people stop being so insular in our perspectives. Successful businesses these days think in terms of world markets.

Indeed, it is unfortunate many of us, including some candidates for high office, have very limited views of the economy and are still in the protectionist mindset. We are even afraid of ASEAN economic integration.

It is definitely good to have our leading conglomerates show the rest of us what it means to think in terms of being world competitive. Maybe, the next time we review our Constitution there will be more confidence to open up our economy to world competition in the same way our conglomerates have been welcomed abroad.

Jollibee, Oishi, Emperador are the pioneers who are making our presence felt abroad. As they bring back profits from their foreign operations, they encourage the next group of Pinoy brands to brave the international market to become global brands as well.

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco.